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Economics Model Answers Thirteen (view source)
Revision as of 17:55, May 20, 2007
, 17:55, May 20, 2007→Honors:
12. Look again at Figure C (attached). This question has three parts. (I) At what point is there an allocatively efficient quantity? (II) At what point is revenue maximized? (III) At what point is profit maximized? Explain your answers.
12. Look again at Figure C (attached). This question has three parts. (I) At what point is there an allocatively efficient quantity? (II) At what point is revenue maximized? (III) At what point is profit maximized? Explain your answers.
'''An allocatively efficient quantity is when P=MC. That is point B.'''
'''Revenue is maximized when marginal revenue is zero. That found by determining the market price on the demand curve corresponding to point E, which appears to be point D.'''
'''Profit is maximized when MR=MC. That is found by determining the market price on the demand curve corresponding to point A, which will be a little higher price than point D.'''